Many people would like to consider self-employment but are scared of the risk. Or they donít know where to begin. This column should help.
Successful self-employment is all about controlling risk. How do you do that?
Keep it simple: offer one simple product or service that requires low investment and offers high profit margin, and, ideally, doesnít require partners.
If youíre going to sell a product, it must have a very high-profit margin. Unless youíre a Wal-Mart, itís hard to make money on a 100% gross-margin item. Iím talking 1000+%. What sort of product has 1000+% markup? Have you had a $3 latte at Starbucks? It cost them about 25 cents. My wife just spent $17.50 for an Estee Lauder lipstick. What does it cost to manufacture? Probably about 25 cents – itís just colored wax. Ever paid $75 for a pair of eyeglass frames? They cost under $1 to produce. Think about it: How much could a simple piece of plastic cost? You must think that way: What should product x cost to manufacture?
Work at home. Especially avoid having a store: the costs of rent, utilities and theft usually will break you.
Donít spend on image. A nice office, let alone an expensive address, fancy furniture, or the latest and greatest computer is rarely worth the money. Image substitutes sizzle for steak.
Spend time, not money, on marketing. For example:
Cross-promote. A personal coach cross-promoted with a weight-loss clinic, with each offering discount certificates for the otherís business.
Teach a seminar at an adult school, library, service club (Rotary, Kiwanis, etc) or university extension. For example, a retirement coach could teach a seminar called, 7 Things Everyone Must Know About Retirement That Most People Donít Know. At the seminar, distribute a useful handout that includes your contact information at the end.
Phone potential customers. Especially make follow-up calls to your existing customers to ask how theyíre doing. Often, without even asking for more business, theyíll give it to you.
Forget about being on the leading edge. Too often, the leading edge turns out to be the bleeding edge. Let someone else be the guinea pig. You copy an already-proven successful business in a slightly different geographic location. If a burrito truck is successful in North Berkeley, itís relatively safe to create a similar enterprise in South Berkeley, less safe to do it in New York.
Here are three self-employment opportunities that meet the above criteria:
Espresso or soup from a cart next to or in a train station, hospital, stadium, supermarket, movie theater, office high-rise, or other high foot-traffic area. This business requires minimal rent, offers high profit margin, is simple to operate, and isnít a fad – coffee and soup arenít going out of style.
Dull-normal businesses: sell sandblasting, broker used truck parts, maintain mobile home parks, whatever. Few college students graduate aspiring to run dull-normal businesses, so the competition is weak, and therefore the profit margin, if you do a good job, is high. You say, ďBut I donít have any passion for dull-normal businesses?Ē Most owners of such businesses didnít either, but their success in these easy-to-prosper-in businesses got many of them passionate quickly.
Computer tutoring. Millions of people still need help using computers. My favorite market: senior citizens. They have time, money, are often computer-resistant, yet would love to email their kids and grandkids. Plus, using a computer makes them feel young and hip. You do the marketing, hire the tutors, and make a piece of the action on each tutor.
Avoid partners. Most of my female clients refuse to go into business without a partner. They say things like, ďI draw energy from other people.Ē Alas, the battlefield of businesses gone bad is littered with partnerships. Even if you donít kill each other, your business has to make twice as much money. Need company? Hire a consultant or low-cost part-time assistant.
Donít get expertise. Donít buy expertise. Rent expertise. To become experts, many people go to school for years, yet you can buy their time for just $20-40 an hour. Better you be the entrepreneur and rent the expertise Ė whether it be an engineer, a graphic designer, whatever Ė on an as-needed basis.
Know when to quit. Many motivational speakers extol the virtue of persistence. They donít tell you that for every person who succeeded by persisting, dozens failed. The art is knowing when to persist and when to give up. Rule of thumb: Your risk increases with every reasonable person who tells you to stop.
All the Business Plan You Need
1. Whatís the product or service?
2. How is it better than the competition?
3. Whoís your target customer?
4. How it will be delivered? (Internet, go to their house, they come to you, a storefront?)
5. How much of your product or service, at what price, would you need to sell to make a decent living?
6. How will you market your business?
7. How will you finance it?
If you follow this advice, youíll greatly increase your chances of being a success at self-employment.
For more information on starting your own business, visit these websites:
Entrepreneur.com - Website for Entrepreneur magazine contains articles from current and past issues organized by topic. A menu across the top of the website as well as down the left side of the home page will take you to articles and information on all aspects of finding, starting and running your own business.
SBA.gov - Small Business Administration website. Click on "Starting Your Business" under the "Select a Custom View" heading. This website has lots of information, including startup basics, finance, employment, marketing, taxes and legal aspects.
StartUpJournal.com - The Wall Street Journalís "Center for Entrepreneurs" is the best place to start researching about starting or buying a business. This website is full of articles from business ideas and how to finance a new business to running a business. The site also has a searchable database on businesses for sale and franchising opportunities. Another feature is "The MiniPlan" that guides would-be entrepreneurs through the basics of creating a business plan.